Developing and managing a website as a marketing tool

Business Plan

Business Plan

Yucel Ger Background to the mock business/case study used as example

This business plan was created by students MH, TM, AP under my supervision and guidance in Spring 2011. The idea was to bring Japanese Capsule Hotel idea to Helsinki to offer cheap accommodation to the young travellers who has tight budget and are flexible with their standards. Selling point of the idea is the cost per night. The weak point in the idea was the applicability of it by the students due to the need for greater financial resources.

2.2.1 Developing and managing website


Business plan of Capsule hotel

Coordinator: Ger Yücel

Business in Action

20.4.2011


MH, TM, AP

2011

Business plan of Capsule hotel

12 pages

Ger Yücel


Contents

1. Introduction to plan .................................................................................................................... 6

2. Executive Summary ..................................................................................................................... 6

3. Vision, mission, values, objectives, swot analysis, strategies etc. .................................................... 7

3.1. Vision ....................................................................................................................................... 7

3.2. Mission ..................................................................................................................................... 7

3.3. Values ....................................................................................................................................... 7

3.4 Objectives .................................................................................................................................. 7

3.5. SWOT analysis .......................................................................................................................... 7

3.6. Strategies ................................................................................................................................... 8

3.7. Goals / Targets ......................................................................................................................... 9

4. Background ............................................................................................................................... 10

4.1. Sales & marketing .................................................................................................................... 10

4.2. PEST- analysis ........................................................................................................................ 10

4.3. Operations & Management ..................................................................................................... 11

4.4. R&D ....................................................................................................................................... 11

4.5. Finances ................................................................................................................................. 12

5. Product / Service description ..................................................................................................... 12

6. Start-up plan ............................................................................................................................. 13

7. Competitive analysis ................................................................................................................... 15

8. Critical risks and problems ......................................................................................................... 16

9. Exit strategy? ............................................................................................................................. 16


1. Introduction to plan

Bringing capsule hotels to Finland and other Nordic countries. Providing simple and

cheap accommodation available to every social class (mostly youngsters). These

capsule hotels provide everything that you need for daily life (Shower, Bathroom,

Bed, and Television). We do not provide meals of any sort. Capsules are sound proof.

2. Executive Summary

Our idea is to build a capsule hotel to the centre of Helsinki. We import capsules

from Vietnam, where capsules are made. Our main challenge is a lack of finance.

Therefore, we try to sell our idea to highest bidder. We have thought that our

business idea would be best in a form of corporation, because this business needs a

huge capital invest that almost nobody has so much money.

This idea´s vision is to provide comfortable accommodation for a cheap price. We

would like to offer for a customer an opportunity to save money. A cheap

accommodation saves money for nicer things such as sightseeing and shopping. The

capsule hotel is absolutely a great opportunity for example for backpackers and young

people with a low budget. Our hotel is available for everyone and any time. We

charge only 35€ per a day.

There is also a marketing plan. We offer to the buyer an opportunity to market the

hotel in an easy way. There is a great chance to grow a customer base. We have also

network for marketing webpages. We can offer those network contacts to the buyer,

if she/he is ready to cover the costs.

We have counted all costs for starting a business. We want to make this idea as simple

as possible for a buyer. We calculated that at a time 3,2 years is already possible to

cover all start-up costs. The time we estimated that an owner can actually make profit

is about 5 years.


Other things that we have thought about are that for example we need to have an

approval from Valtion teknillinen tutkimuskeskus (VTT). Everything has to be

formalized to the Finnish form. Therefore we need to take an account of rules and

regulations. We have to make sure that our product is safe for customer.

3. Vision, mission, values, objectives, swot analysis, strategies etc.

3.1. Vision

- Our vision is to provide comfortable accommodation for a cheap price.

3.2. Mission

- Mission: Our purpose is to provide cheap& comfortable accommodation for

everyone (help them save money). . We want our customers to be happy with our

best services.

- Mission statement: Capsule size, Capsule price!

3.3. Values

We are an eco-friendly company. We are committed to a sustainable nature, future.

We are going to follow rules and regulations in Finland.

3.4 Objectives

- To attract a lot of potential customers from Omenahotelli (because it’s the cheapest

hotel available in Finland).

3.5. SWOT analysis


Strengths:

- The cheapest hotel in Helsinki, Competitive advantage

- Unique

- The first capsule hotel in Finland

- A location in centre of Helsinki

- We can make use of technology and internet in Marketing.

Weaknesses:

- Someone might consider that it is weird, not enough luxury especially for

older people

- Financial opportunities, our hotel needs a lot of capital.

- Might have difficulties to get all materials needed.

Opportunities:

- Expanding in Europe

- Possibility to make profit

- Global network, exporting the capsules from Japan or from other countries

- More customers in the summer because of traveling and tourism.

Treats:

- Too different

- Laws and regulations in Finland

- Is the capsule ready to use? Acceptable in Finland or what kind of changes do

we have to do?

3.6. Strategies

- Strengthening our strengths: Keeping up to the cheapest prices. Make sure you

always have the cheapest prices. Keep it unique; try to make it hard for people to

copycat. Choose location carefully, close to bus / tram / metro location. Centre of


Helsinki as mentioned above. We have to hire an IT specialist who is capable of

updating our webpages and constructing them.

- Solving our weaknesses: We cannot build the hotel into a luxury one, it is what it is.

People who want to come there do come there in hope of cheap accommodation,

instead of good service. If we don’t get the materials from other countries, we might

have to make a deal with a Finnish company (someone might be able to build us the

capsules). We have to market our hotel accordingly, to get a lot of people interested

and inventing into our hotel.

Opportunities: Expanding as quickly as possible, before other businesses come into

the same market. Trying to stay ahead of our possible competitors, advertising and

keeping the top notch place of our capsule hotel. Being the first and the best. Aiming

at getting a quick profit, not so sacrifice our plans before profit, but still wanting to

make it as fast as possible of course. Maybe providing special prices during the

summer, special campaigns for backpackers and such, to interest people from other

countries into our hotel too.

Threats: We cannot change the fact that the hotel is different, that’s one of our

strengths as well. We cannot change laws and regulations in Finland. Therefore, we

have to follow them carefully and make a research beforehand. We are going to use a

professional for law issues. We have to hire at least a few people, who know exactly

what to do. We also need a person, who knows about landscaping. After knowing

more about capsules, we need permits and other information. Are we allowed to use

the capsules right away or what changes do we have to do before we can use them for

our hotel.

3.7. Goals / Targets

Our business idea´s long term goal is to be making profit in 5 years. To grow

customer base, and keep the ones who came one coming back for more. Expanding


as soon as possible into other European countries. Providing our customers with a

comfortable sleeping place for a low price. Maintaining our low prices.

4. Background

Antti had a unique idea about brining capsule hotels to Europe and especially Finland.

We started building our idea from scratch. Tuula and Marja are the other participants.

This is our school assignment as well, making a business plan and hopefully someday

executing it. We are hopeful because we have a unique idea that might actually work.

When our idea is ready, we are going to sell it to the highest bidder.

4.1. Sales & marketing

- Marketing happens in spotify (almost every young person has it) + Facebook. Our

IT person that we’ll hire will make our internet pages, as well as email addresses and

such. Our marketing target is young travelling people, who we are trying to reach. We

focus mainly on media marketing, things that young people use daily. We assume that

Finland is gaining an increasing amount of travelling tourists and other young people

interested in the country, and its events. Helsinki offers many activities for young and

flexible people, and that’s why they might need cheap accommodation.

4.2. PEST- analysis

Political factors: Our business idea buyer has to pay taxes on the corporation rates.

We follow collective agreements and labour laws in Finland, which include salary and

working times. We have to follow the cities regulations concerning pollution and such

economic factors. We sort trash accordingly. If we import the capsules from another

country, we have to pay according fees in tariffs. Finland has a stable political

situation; it’s not likely to shift rapidly.

Economical factors: Finland’s economy is growing slowly and steadily at the moment.

The inflation in Finnish in 2/2011 February was 3,3%. The approximate monthly

change then was 0,6%. Interest rate (Euribor 12kk) from November 2010 to April


2011 has gone up approximately 0,5%. Currently the interest rate in Finland is around

2,1% (Euribor 12kk).

Social factors: The population in Finland is quite low compared to other European

countries. After visiting tilastokeskus.fi we realized that our potential customer group

is large in numbers (ages 15-40). Safety issues in Finland, concerning everything are

monitored closely and effectively. We have to obey these regulations closely, if we

want to make our business succeed. VTT (Valtion teknillinen tutkimuskeskus)

monitors these issues, and we have to co-operate with them closely. We have to get

consultation from them. We are studying social trends closely, and imply them to our

operations.

Technological factors: We are going to automate some of our operations, such as

entering the capsule, booking the room and getting inside the hotel. Also the washing

facilities need a code to be accessed with. The industry has high entry barriers, we

need a lot of capital when founding the business, and the idea is risky in some way so

it’s not easy to enter without careful planning. Our laundry services are outsourced, as

well as the cleaning services and security service. The receptionists are the only ones

that we are going to hire.

Environmental factors: Finland has four seasons, winter, spring, summer and fall.

They might be exotic to some travellers. During the summer we are expecting to have

more customers, because people generally travel during summer holidays. We expect

the hotel to be full during summers. We are going to be eco-friendly, have our

products made of eco-friendly materials. Soaps and shampoos are not animal tested.

We recycle our trash according to regulations and even above.

4.3. Operations & Management

We are not going to be able to make all the decisions concerning our business. We

have to sell ourselves out a little bit, to get financing. We are going to sell our idea to

the highest bidder. Once that is done, we have no control over the idea / business.

4.4. R&D


Research & Development: VTT must approve or disapprove our capsule.

Accordingly, we will make our product safer and best suited for the Finnish market.

The other option is designing our own capsule. Modifying it based on the available

one, or designing our own capsule with professionals of the industry and technology.

We can also search the opportunity of using capsules that are made in Finland. There

are companies who build ship cabin modules; they might be able to design a capsule

for us as well.

4.5. Finances

We must search for people interested in investing money to our business. We want to

sell our business idea to the highest bidder. We want to keep our business as a

corporation, sell the business to many different people. It’s most efficient for our

business to be a corporation, but it’s up to the actual owner that holds the most

shares of the business.

5. Product / Service description

Staff: We need cleaners from a cleaning company. We are going to ask offers from

various cleaning companies. We compare, which one is the cheapest and the best for

us. Probably we use Sol, Iss or Hansalaiset, because they have quite good reputation.

We need a security surveillance, which is used 24/7. For security issues we have to

contact such a company, which provides security services. We are going to ask for

offers from various companies. We choose a security company, which is the best for

us. Of course many things depend of our budget.

We also need a receptionist, who is working from 6 a.m. until 8 p.m. We need a

technology system. When a customer purchases accommodation in our hotel a

technology company sends a text message to them. The text message gives specific

information. It tells a code to a customer. The first code tells about how to get into

the hotel. The second code is a code into a capsule. The text message also tells a

capsule number. This system makes easy for a customer, to arrive to our hotel,

whenever s/he prefers.


Information about capsules;

- 135 sqm meter can fit up 100 capsule beds

- A capsule hotel can be constructed in a week

- Beds are made of fire- proof material

- Beds all come with a roll down curtain to ensure privacy

- Fit a full sized adult comfortably

- LCD TV, radio, alarm clock and adjustable lighting within the capsule bed.

- Unique individual air ventilation

- Extremely cost- effective as compared to a budget hotel.

Our capsule hotel is composed of two major sections. A public lounge space. A

public space includes also restrooms and shower rooms for men and women. We also

offer an opportunity for Sauna. We have two large size saunas. Other one is located

at men´s side and another one at women´s side.

Another section of our hotel is a sleeping space. There are capsules, where customers

can relax and rest after a tough day. Our hotel provides something to everyone. If you

miss your flight or train, there is always an opportunity to come to our hotel and have

a good night’s sleep. Costs are affordable and our quality is high compared to our

prices.

6. Start-up plan

Capsules all together: 100 capsules = 2000€ per a capsule x 100 = 200 000€

Building the place, design, material and workers: 157 000€

Renovating the place: Plumbing and bathroom renovating: 70 000€

Laundry services from Comforta (cleaning and renting us bed cloths and so) 7200

Rent: 8000€ / per month

Cleaning service: 56 hours per month x 2 persons = 112 hours = 30€ x 112 = 3360€

/ per month

Shampoo and soap products: 2000 per month


Security person: 2000€ / per month per month per person x 3 = 6000€

Receptionist: 1500€ / per month per person = 3000€

Security service: 100 000€ (security cameras and other equipment)

It services: we have networks, and could possibly get someone to build us a website

for almost free. Maximum 1000€

Total costs: 557560

Marketing costs: We advertise mostly through social networks. We make a facebook

group page for our hotel, and send the invitation to join to all of our friends. And ask

all of our friends to send the invitation onwards to their friends. So we try to build a

lot of people to our facebook fan page, and that’s actually free.

Calculation of critical point and all other costs:

Rent: 8000€ / per month (A space in centre of Helsinki, around 300 Sqm)

Workers, laundry service, cleaning service, security service :

6000+3000+3360+7200= 19560€

Shampoo, soap and such products: 2000€

It service; every now and then: 150€ per update

Nonflexible costs: 8000€+19560€ = 27560€

Flexible costs: 2000€+ 150€= 2150€

Total costs: 27560€+2150€=29710€

Customer pays per night around 35€, if we have 60% filled about our capacity (60

customers), because we have 100 capsules it means: 35€x60x30= 63000 per month

We need 29 customers per a day that we can cover total costs

Q= 60

P= 35€


Total revenue: 63 000€

Result: 63000-29710=33290€

So we would make profit 33290€ per month.

Flexible cost per unit: We have to spend 18€ per customer

Non flexible costs: 27560€

Critical point: 29710/ (2100-(60x18) = 29,18

When we check the calculation 29 customers per a day x35€ x moth (30 days)

29x35x30 =30450€ Therefore we are able to cover the costs, which are 29710€ per a

month.

How long does it take to cover start-up costs?

If we calculate using our critical point 29 customers per a day, it means that;

(29x30x35)

14790x12= 177480€ Start-up costs: 557560/177480= 3,14153 years

We can cover start-up costs in 3, 5 years. Unfortunately some surprises might occur;

therefore the real amount of years is about 5. After those investors, buyers are

capable to make profit.

7. Competitive analysis

- Who could we make into a partnering company. They promote us, we

promote them. Potential operative partners.

- Omena hotelli is a potential partner for us. Possibly Euro Hostel in Helsinki

and Stadium hostel.

- We mostly compete with cheap hotels, in the area of Helsinki. The normal

cost per night in Helsinki is around 60€. We are targeting the cheaper markets and we


should have a niche market that would work. A lot of the youngsters just need cheap

accommodation, they do not care so much about service. They just need to sleep in a

cheap place. That’s a trend arising amongst youngsters.

8. Critical risks and problems

One problem is possibly not finding enough investors, or anyone interested in the

business. We should proof in this document that our business can succeed.

We have to check out and have a capsule approved for Finnish market and during

this process some extra costs may appear. The worst case is that the capsules might

not be approved for Finnish market at all.

Someone might want to steal our idea, because construction costs are considerably

lower compare to other hotels.

9. Exit strategy?

Our exit strategy consists of close inspection of our income and total revenue. If we

find out that our business is not profitable enough in the long run, we will abandon

the ship. We know that in our situation, as students we are not capable of investing

money at all into this corporation. So we don’t need an exit strategy because we are

not going to invest money into it.

Developing and managing a website as a marketing tool

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